Thursday, August 3, 2017

IBM recently reported that its cloud revenues continue to rise, however not at the rate of its larger public cloud competitors and not at the pace that investors have come to expect. The company's Q2 financial report posted in late July revealed that that cloud revenues grew 17% in the quarter, led by as-a-service offerings, which were up 32% year-to-year.

Total cloud revenue was $15.1 billion for the last 12 months and XaaS revenue was $8.8 billion at an annual exit run rate in the quarter, up 30% year to year (up 32% adjusting for currency). Revenue from analytics increased 4% (up 6% adjusting for currency), revenue from mobile increased 27% (up 29% adjusting for currency) and revenue from security increased 4% (up 5% adjusting for currency).

These growth areas were offset by continued declines in legacy revenue, leading to an overall decline in revenue for the company compared to the same period a year earlier and marking the 21st consecutive quarter of decline for the company. Overall, Q2 revenue was down 4.7% to $19.3 billion compared to a year ago.

Ginni Rometty, IBM chairman, president and CEO, said:

- "In the second quarter, we strengthened our position as the enterprise cloud leader and added more of the world's leading companies to the IBM Cloud… it continues to innovate, adding regtech capabilities to its portfolio of Watson offerings; developing solutions based on emerging technologies such as Blockchain; and reinventing the IBM mainframe by enabling clients to encrypt all data, all the time".

Progress in cloud services

IBM's optimism, despite the sliding sales and slower than expect growth in cloud services, perhaps can be traced to its early and strategic entrance into the nascent market for artificial intelligence, a string of recent high-profile wins for cloud services, and a vast pace of innovation in new services. Some of IBM's major new customer engagements for Q2 included:

·Lloyds Banking Group, which signed a 10-year cloud services agreement with IBM. Under the contract, IBM will transform Lloyd’s from branch structures to digital channels, embracing the API economy without compromising their existing systems and focusing on end-to-end cost reductions.

·American Airlines, which has agreed to use IBM Cloud as the foundation for a massive cloud transformation. The IBM Cloud will host the airline’s website, aa.com, its customer-facing application, airport kiosks and critical enterprise workloads.

·BMW - IBM became a pilot partner of BMW Car Data - which will leverage IBM Cloud and IBM Watson IoT - using cognitive and data analytics services to enable third parties, such as automotive repair shops or insurance companies, to develop entirely new customer experiences.

·Bombardier, which announced it is extending its long-term partnership with IBM through a new six-year deal valued at approximately $700 million. The contract includes IBM Services and IBM Cloud management of Bombardier’s worldwide IT infrastructure and operations. The services management agreement spans 47 countries and represents one of IBM’s largest cloud partnerships in Canada.

·Blockchain on the IBM Cloud - a consortium of seven large European banks selected IBM to build and host a new trade finance platform that will be based on IBM Blockchain and run on the IBM Cloud.

·Danske Bank, which recently selected IBM for new 10-year IT infrastructure service transformation project. The IBM Services Platform with Watson provides artificial intelligence capabilities. IBM said its platform enables other automation tools to do more than execute simple instructions, they can now run diagnostics and execute actions to address the root causes of issues. Unstructured e-mails and chats can be read in natural language and resulting insights used to resolve problems without manual intervention.

Expanding the fleet of IBM Cloud Data Centers

IBM has announced the opening of four new Cloud Data Centers, two in the UK (London), one is in Australia (Sydney) and one in the U.S. (San Jose). This brings the total number of IBM Cloud Data Centers to 60 across 19 countries. One notable difference from Google’s hyperscale data centre strategy is that IBM operates smaller facilities but has many more. This helps address data sovereignty requirements in many countries as well as network latency issues.

Offering NVIDIA Tesla P100 GPUs as-a-service

NVIDIA and IBM announced that IBM it is the first major global cloud provider to make the NVIDIA Tesla P100 GPU accelerator available on the cloud, geared towards speeding AI workloads. IBM also achieved new performance benchmarks with the P100 GPU accelerator on the IBM cloud, reducing deep learning training time by up to 65% compared to NVIDIA Tesla K80 GPU.

Direct Cloud Connectivity

In April, Comcast Business announced that it was providing its customers with direct, dedicated links to IBM Cloud’s global network of data centres.

Progress with IBM Watson

Ever since the launch of Watson in 2011, it has been clear that IBM was on the path to artificial intelligence. Watson is its crown jewel and its key point for differentiation. IBM now offers many examples of how Watson can be a transformative decision maker for many industry verticals. IBM's television commercials, which have been heavily promoted in U.S. over the past several months, depict Watson in many industries, from wine vineyards to telemedicine. In the entertainment space, 20th Century Fox is now working with IBM Watson to better understand what is happening in videos. Automatic scene detection lets the cognitive platform analyse how the plot of a film progresses in comparison to other works of the same genre which have measured outcomes with real audiences. This lets Watson predict how a movie will be received, as well to automatically create a trailer.

The industry is looking very closely at open source software and open source hardware for a number of reasons, says Dan Pitt, MEF, Senior Vice President. Open source shares the development costs in a way that provides everyone with access to the same code base. MEF builds a larger framework that incorporates components that could be built with open source or closed source software elements, shows how you can create end-to-end services with them, and defines LSO APIs that MEF members can instantiate with open source software. MEF currently is developing Software Development Kits (SDKs) for the LSO APIs.

Arista Networks reports stronger than expected results for its second quarter ended June 30, 2017.

Revenue rose to $405.2 million, an increase of 20.8% compared to the first quarter of 2017, and an increase of 50.8% from the second quarter of 2016. GAAP gross margin was 64.1%, compared to GAAP gross margin of 63.9% in the first quarter of 2017 and 63.8% in the second quarter of 2016. GAAP net income was $102.7 million, or $1.30 per diluted share, compared to GAAP net income of $38.9 million, or $0.53 per diluted share, in the second quarter of 2016.

"As we complete our third anniversary of becoming a public company, I am pleased with our record results in Q2 2017,” stated Jayshree Ullal, Arista President and CEO. “Our substantial financial performance, customer success and industry recognition has accelerated the migration to mainstream cloud networking.”

The U.S. Senate approved the nominations of Jessica Rosenworcel and Brendan Carr to serve as FCC Commissioners. This restores the FCC as a five-person body.

Jessica Rosenworcel previously served as FCC Commissioner under the Obama administration since 2011 and was renominated in 2015 but the Senate failed to renew her posting during the 2016 election cycle. Rosenworcel replaced long-term FCC Commissioner Michael Copps when his term ended in December 2011. She previously was the Senior Communications Counsel for the United States Senate Committee on Commerce, Science, and Transportation. Before that, she worked for Senator Jay Rockefeller IV, and at the FCC from 1999 to 2007, serving as Legal Advisor and then Senior Legal Advisor to Commissioner Michael J. Copps (2003-2007), Legal Counsel to the Bureau Chief of the Wireline Competition Bureau (2002-2003), and as an Attorney-Advisor in the Policy Division of the Common Carrier Bureau (1999-2002). She holds a B.A. from Wesleyan University and a J.D. from New York University School of Law.

Brendan Carr is currently the General Counsel of the Federal Communications Commission, where he serves as the chief legal advisor to the Commission and FCC staff. Previously, he was lead advisor to FCC Commissioner Ajit Pai on wireless, public safety, and international issues. Carr has also worked as an attorney at Wiley Rein LLP. He hold an undergraduate degree from Georgetown University and a J.D. from Catholic University.

Infinera reported Q2 revenue of $176.8 million compared to $175.5 million in the first quarter of 2017 and $258.8 million in the second quarter of 2016. GAAP gross margin for the quarter was 36.7% compared to 36.5% in the first quarter of 2017 and 47.8% in the second quarter of 2016. GAAP operating margin for the quarter was (22.9)% compared to (21.6)% in the first quarter of 2017 and 6.2% in the second quarter of 2016.

GAAP net loss for the quarter was $(42.8) million, or $(0.29) per share, compared to a net loss of $(40.5) million, or $(0.28) per share, in the first quarter of 2017, and net income of $11.5 million, or $0.08 per diluted share, in the second quarter of 2016.

“Highlighted by delivery of ICE4 products to market, I was pleased with our performance in the second quarter,” said Tom Fallon, Infinera's Chief Executive Officer. “We delivered the Cloud Xpress 2 to three customers and had early deployments of the XT-3300. As we continue to deliver on a suite of new products over the upcoming quarters, I believe we are well positioned to grow market share and to gradually improve our financial performance.”

Oclaro reported financial results for its fourth quarter and fiscal year 2017, ended July 1, 2017, as follows:

1. Revenue for the fourth quarter of $149.38 million, down 7.9% compared with $162.18 million for the third quarter and up 19.3% from $125.18 million for the fourth quarter of fiscal 2016.

2. Gross income for the fourth quarter of $61.33 million, down 8.2% compared with $66.79 million for the third quarter and up 52.6% from $40.18 million for the fourth quarter of fiscal 2016.

3. R&D expenditure for the fourth quarter of $15.75 million, up 8.8% compared with $14.48 million for the third quarter and up 24.3% from $12.67 million for the fourth quarter of fiscal 2016.

4. SG&A expenditure for the fourth quarter of $15.58 million, up 5.7% compared with $14.74 million for the third quarter and up 8.2% from $14.40 million for the fourth quarter of fiscal 2016.

5. Total operating expenditure for the fourth quarter of $31.44 million, up 8.2% compared with $29.05 million for the third quarter and up 14.9% from $27.37 million for the fourth quarter of fiscal 2016.

6. On a GAAP basis, a net income for the fourth quarter of $56.03 million, compared with a net income of $38.21 million for the third quarter and a net income of $11.84 million for the fourth quarter of fiscal 2016.

On a non-GAAP basis, a net income for the fourth quarter of $33.93 million, compared with a net income of $39.89 million for the third quarter and a net income of $14.41 million for the fourth quarter of fiscal 2016.

7. Cash, cash equivalents and restricted cash as of July 1, 2017 $219.99 million, versus $214.78 million as at April 1, 2017 and $96.64 million as at July 2, 2016.

Additional results and notes

For the full year 2017 Oclaro reported revenue of $600.97 million, compared with $407.91 million in 2016, and a net income of $127.86 million, versus net income of $8.58 million for the prior year.

Oclaro stated that, as expected, QSFP28 sales in the fourth quarter doubled sequentially, while QSFP28 and ACO products accounted for over 40% of total sales, with demand expected to be strong in fiscal year 2018 driven by growth in the metro and data centre markets. 100 Gbit/s and beyond sales were $121 million in the fourth quarter and represented 81% of total sales. Sales of client-side CFP products declined by 25% and 40 Gbit/s and below product sales decreased by over 20%.

In the fourth quarter, Oclaro's top four customers represented 55% of total revenue, versus 68% in the second quarter. The top four customers contributed 17%, 13% and 12% of sales.. For fiscal year 2017 the top customers were Cisco with 18%, ZTE 18%, Huawei with 15% and Nokia 12%.

Oclaro also announced the appointment of Ian Small, most recently chief data officer at Telefónica, to its board of directors, effective September 1, 2017. On July 27th, Oclaro increased the size of the board from seven to eight members.

Outlook

For the first quarter, Oclaro expects revenue of between $151 and $159 million, representing a sequential increase of 3.8% at the midpoint.

WideOpenWest (WOW!), a provider of Internet, cable TV and voice services based in Englewood, Colorado, announced that it has entered into a definitive agreement to sell a portion of its fibre network in its Chicago market to a subsidiary of Verizon for $225 million in cash.

In addition, WOW! and Verizon will enter into a new agreement pursuant to which WOW! will complete the build-out of the network in exchange for a payment of approximately $50 million (WOW!'s estimated cost for completion of the network build-out), payable as the remaining network elements are completed. The network, expected to be completed in the second half of 2018, will provide backhaul services to over 500 macro-cell wireless sites and more than 500 small-cell sites.

Through the agreement, Verizon will gain a high-capacity fibre network designed to support multi-use services. The company noted that the network already connects Verizon Wireless macro towers and small cells, and will reduce its leasing costs via fibre connectivity to more than 500 macro-cell wireless sites and 500 small-cell wireless sites.

WOW! noted that the transaction is subject to receipt of various consents and approvals, as well as other customary closing conditions, and is expected to close early in the first quarter of next year. WOW! stated that it plans to use a portion of the proceeds from the transaction to pay-down existing debt balances.

Commenting on the transaction, Hans Vestberg, Verizon president of Network and Technology, said, "Following recent agreements with Corning, Prysmian and Straight Path, this is another example of Verizon's commitment to invest in multi-use fibre to provide customers with next-generation broadband services, such as smart cities and 5G… this acquisition will also help create comprehensive digital solutions for small- and medium-business and enterprise customers".

MRV Communications reported financial results for the second quarter ended June 30, 2017 as follows:

1. Revenue for the second quarter of 2017 of $19.72 million, down 6.8% compared with $21.17 million in the preceding first quarter and down 8.6% versus $21.58 million in the prior year second quarter.

2. Gross profit for the second quarter of $10.16 million, down 5.0% compared with $10.70 million in the preceding first quarter and up 1.2% versus $10.04 million in the prior year second quarter.

3. R&D expenditure for the second quarter of $4.61 million, down 2.5% compared with $4.73 million in the preceding first quarter and down 10.0% versus $5.12 million in the prior year second quarter.

4. SG&A expenditure for the second quarter of $7.45 million, up 10.0% compared with $6,77 million in the preceding first quarter and up 6.3% versus $7.01 million in the prior year second quarter.

5. Total operating expenditure for the second quarter of $12.06 million, up 4.9% compared with $11.50 million in the preceding first quarter and down 0.6% versus $12.13 million in the prior year second quarter.

6. On a GAAP basis, net loss for the second quarter of $2.10 million, compared with a net loss of $1.04 million in the preceding first quarter and a net loss of $2.02 million in the prior year second quarter.

On a non-GAAP basis, net loss for the second quarter of $0.44 million, compared with a net loss of $0.52 million in the preceding first quarter and a net loss of $1.31 million in the prior year second quarter.

7. Cash and cash equivalents as of June 30, 2017 of $24.33 million, compared with $21.41 million as at March 31, 2017 and compared with $25.12 million as at December 31, 2016.

Additional results and notes

MRV noted that on July 2, 2017 it entered into a merger agreement with ADVA NA Holdings and its subsidiary Golden Acquisition (Merger Sub). Under the merger agreement Merger Sub was to commence a cash tender offer to purchase all issued and outstanding shares of MRV for $10.00 per share. On completion of the offer Merger Sub will merge with and into the company, with MRV continuing as the surviving corporation and a wholly owned subsidiary of ADVA.

On July 17th, the offer commenced as per the agreement and is currently scheduled to expire at midnight, August 11, 2017.

Coriant announced that the CESNET, provider of network infrastructure for the R&E sector in the Czech Republic, has tested the Coriant Groove G30 Network Disaggregation Platform combined with the CESNET-developed Czech Light family of advanced optical devices for a trial of high-capacity coherent optical transmission in its nationwide e-infrastructure.

As part of CESNET's planned deployment and ongoing exploration of new technologies, Coriant and CESNET are collaborating to demonstrate bi-directional single lambda 200 Gbit/s transmission in a multi-site data centre interconnect (DCI) application.

CESNET develops and operates the Czech Republic's national e-infrastructure that is designed to support the science, research and education communities. The nationwide broadband network connects universities and research institutions located in all of the country's major cities and is designed to provide a reliable foundation for high-performance computer networks, computational grids, data storage and transfer and collaborative working environments.

The Coriant Groove G30 Network Disaggregation Platform is an advanced 1 RU modular, open transport solution for cloud and data centre networks that can be configured both as a muxponder terminal solution and as an open line system (OLS) optical layer solution. Targeting interconnectivity applications, the disaggregated Groove G30 is designed to deliver high density and flexibility with low power consumption.

The CESNET Association, founded by Czech universities and the Academy of Sciences, engages in research and development in ICT and is responsible for building and developing the CESNET national e-infrastructure for research and education. CESNET also represents the Czech Republic in international projects, notably the pan-European GÉANT network project and grid projects (EGI.eu).

In June, CESNET announced it had been awarded a U.S. patent for a device in the Czech Light family of advanced photonic solutions for transmission and processing of optical signals.

The U.S, Patent and Trademark Office has registered patent No. 9,654,215, 'Spectrally flexible device for bidirectional transmissions of optical signals sensitive to timing'. The patented device enables long-distance transmission of accurate and stable optical signals over hundreds or thousands of kilometres utilising spectral bands that are not currently in use in telecommunications fibres.

CESNET noted that it is seeking entities interested in manufacturing and deploying the Czech Light family of devices.

Under the agreement, Zayo will initially offer CloudLink in seven Peak 10 data centres, and will work with Peak 10 to expand further across the company's expanding portfolio. The cloud connectivity service provides dedicated bandwidth options and enables secure connectivity directly to major public cloud providers. Customers can opt to use traditional, aggregated bandwidth or FlexConnect, Zayo's usage-based Ethernet solution.

Based in Charlotte, North Carolina, Peak 10 operates 16 data centres in key U.S. markets and serves a range of customers in the U.S. and internationally. With an operational footprint of more than 890,000 sq feet, Peak 10 connects multiple data centres to an ecosystem of solutions, delivering IT business communications and enabling customers to connect globally.

* Separately, Zayo recently announced that a global cloud service provider had selected it to provide a wavelength solution to enable full diversity for a portion of its backbone network. Zayo will provide three 100 Gbit/s wavelengths on four routes connecting the cloud providers' data centres in four key markets across the U.S. The route leverages Zayo's existing network, including infrastructure acquired from Electric Lightwave, with capital expenditure required only for equipment.

CloudVelox, a provider of cloud automation and orchestration software, announced release 5.0 of its One Hybrid Cloud software with new capabilities to enable automated mass migrations to data centres with VMware virtualised environments.

With the new release, One Hybrid Cloud enables three new use cases for enterprise customers with the flexibility to migrate workloads from any source to data centre environments including between data centres (DC to DC), rack to rack (intra-data centre) and migrate or repatriate workloads from the cloud to the data centre (cloud to DC).

Previously, CloudVelox offered capabilities including automated Application Blueprinting and automated network customisation to enable automated migration and recovery from the data centre to the cloud. The company noted that the new use cases deliver on its vision of enabling IT executives and partners manage a boundary-less data centre by enabling a dynamic pool of resources without boundaries and without lock-in.

CloudVelox noted that enterprise IT executives have concerns relating to their applications, including which applications run where, moving a workload to the correct operating environment/destination, and avoiding lock-in. To help address these issues, CloudVelox offers a software solution providing the flexibility to shift any workload in and out of data centres and clouds to help enable the most efficient running of a workload without re-factoring or re-engineering the application.

Using CloudVelox's One Hybrid Cloud 5.0 software, a single solution can automate the migration of workloads/applications from multiple sources (physical, virtual, public, private or hybrid cloud) to any destination (virtual, public, private or hybrid cloud), enabling new use cases utilising its patented Automated Application Blueprinting technology.

NeoPhotonics reported Q2 revenue of $73.2 million, up $1.5 million, or 2%, from the prior quarter, but down from $99 million for the same period last year. Gross margin was 22.9%, down from 25.8% in the prior quarter
Non-GAAP Gross margin was 23.9%, down from 26.3% in the prior quarter. The was a net loss of $9.3 million, an improvement from a net loss of $11.5 million in the prior quarter.

"We are pleased to report revenue of $73.2 million at the upper end of our previously-announced outlook range and representing sequential growth from the first quarter, including modest sequential growth in China despite an inventory overhang,” said Tim Jenks, Chairman and CEO of NeoPhotonics. “While the near term outlook in China isn’t certain, we see positive indicators there for the longer-term and we see strong current demand in North America. We anticipate robust growth in the medium and long term driven by metro, data center interconnect, a normalized China market and the emergence of 400G and above,” concluded Mr. Jenks.

Evolve IP, describing itself as the Cloud Strategy Company, announced that it has acquired Mtel, a European cloud communications solutions provider based in the Netherlands, as part of the company's ongoing growth strategy and to provide an increased presence in Europe.

Evolve IP noted that it shares a core market differentiator with Mtel in terms of delivering tailored contact centre solutions and custom integration designed to meet the specific needs of a customer's business. Mtel also offers a physical presence and data centres in Europe, complementing Evolve IP's existing facilities in the UK, Israel and Australia. In addition, Mtel has significant local technical, support, development and sales and marketing resources in the region.

Mtel offers a portfolio of cloud-hosted ICT/telephone services for managing and monitoring customer contact centres. Its solutions are delivered via a Software-as-a-Service (SaaS) model designed to integrate with existing ICT infrastructure. Mtel's technology is based on multi-tenant software from major suppliers that allows customised configurations to address specific business needs.

In May, Evolve IP announced that it had acquired Azzaron, a workspace-a- a-service provider located in Mesa, Arizona, marking its 10th acquisition. The purchase was part of the company's ongoing growth strategy, providing an increased presence in the American southwest region and the veterinary, construction and legal vertical markets. Azzaron provides cloud computing solutions including desktop-as-a-service (DaaS), infrastructure-as-a-service (IaaS) and a secure file sharing and collaboration service.